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Wednesday, June 23, 2010

Republican National Committee chairman Michael Steele appeared on CNBC yesterday morning bashing President Obama's efforts at job creation. He told the interviewer that we need to return to the policies of George Bush because, "George Bush created a lot of jobs." That was an outrageous lie.

In the last month of Bush's administration, the Wall Street Journal (certainly no liberal media source) printed a story saying the Bush administration had created only only 1 million jobs during his two terms in office. That is pitiful when compared to the last two Democrats in office. Carter created 10.5 million jobs in only one term in office, and Clinton created a whopping 23 million jobs during his years in office.

Making Bush look even worse is the fact that President Obama is on-target to produce more than 1 million jobs just in 2010. Add this to the fact that the Bush policies contributed to the largest recession since the Great Depression, and you have the perfect picture of absolute incompetence in economic affairs. Just in his last four months in office George Bush lost more than 2 million jobs for this country (see chart).

Looking at these numbers, it is amazing to me that anyone (especially someone as high up as the chair of the RNC) could suggest a return to the policies of the Bush administration would be anything other than disastrous. It is ludicrous that Republicans hold themselves up as better guardians of the economy than Democrats.

Democratic policies may not be the best for the rich bankers of Wall Street, but they produce a whole lot more jobs for the people on Main Street -- and that's what the country needs right now.

The Bush legacy should be remembered as a grand and failed experiment of what happens when conservatives are in complete control of the government. Conservative ideology rails against government, argues that government is the problem, not the solution. So when a government run by conservatives so utterly fails to promote and protect the common good for all citizens, is it any wonder?

And now the same folks that brought us the worst decade for the U.S. economy in modern times by a wide range of data, with zero net job growth and the slowest rise in economic output since the 1930s are saying they want voters to trust them as they cast their votes this coming November.Many who stayed employed were hurt too, with middle-income families making less in 2008, when adjusted for inflation, than they did in 1999 — the first decade since the 1960s that median incomes have fallen. On balance, American families were worse off:

And the net worth of American households — the value of their houses, retirement funds and other assets minus debts — has also declined when adjusted for inflation, compared with sharp gains in every previous decade since data were initially collected in the 1950s. “This was the first business cycle where a working-age household ended up worse at the end of it than the beginning, and this in spite of substantial growth in productivity, which should have been able to improve everyone’s well-being,” said Lawrence Mishel, president of the Economic Policy Institute, a liberal think tank.

As IHS Global Insight Chief Economist Nariman Behravesh told the Washington Post, “The problem is that the conservatives controlling the government during the last decade mismanaged the macroeconomy, and that got us in big trouble.” America and Texas has learned what life is like under a true conservative government. Controlling all branches of government during much of the last decade gave Republicans near absolute power to construct a conservative government agenda with little compromise or input from progressives.

In a position of virtually unchecked power during most of the last decade conservatives failed utterly at the most basic responsibilities of governing, leaving our nation weaker and our people less prosperous, less safe and less free. The Bush years may have been years of political and legislative victories for conservatives, but those years of political and legislative victories have resulted in disastrous conservative governance and a tremendous increase in the national debt!

The nation moved from an annual budget surplus of $300 billion, as Pres. Clinton left office to an annual budget deficit of $1 trillion, as Pres. Bush left office. Republican representatives in Washington fully supported and voted for Pres. Bush's tax cuts and increasing deficit spending without complaint.

Reagan's "supply-side" mythology that "tax cut stimulus works best" is alive and well and still promoted by conservatives today. If tax cuts are the most stimulative approach to creating jobs in the economy, as RNC Chair Steele claimed during his CNBC appearance, then the economy should already be racing, given the trillions of dollars in tax cuts President Bush and Republicans gave the nation between 2001 and 2008. Right? Wrong! Pres.

The U.S. Department of Commerce data shows that as Pres. Bush was preparing to leave office in the fourth quarter of 2008 the economy shrank at its fastest pace in nearly 27 years, sinking deeper into recession as consumers and business cut spending.

The government report shows a broad-based contraction across nearly every business sector with the gross domestic product, which measures total goods and services output within U.S. borders, in a near free fall 3.8 percent annual rate of contraction in the fourth quarter. That is the biggest drop since the first quarter of 1982, when output contracted 6.4 percent.

The Commerce Department report said that late 2008 consumer spending, which accounts for two-thirds of U.S. economic activity, fell 3.5 percent in the fourth quarter, after declining 3.8 percent in the third quarter, and Q4 spending on durable goods, like cars and furniture, plunged 22.4 percent, the steepest decline since Q4 of 1987. Investment by business also sharply declined at 19.1 percent, for the sharpest pull-back since the first quarter of 1975, and residential investment plummeted 23.6 percent too. Exports of goods and services plunged as well at a the rate of 19.7 percent, the biggest drop since the third quarter of 1974.

Added to the 0.5 percent contraction in GDP in the third quarter of 2008, the fourth quarter contraction rate of 3.8 percent yields the first consecutive quarterly declines in GDP since the fourth quarter of 1990 and the first three months of 1991.

Across all four quarters of 2008, GDP rose 1.3 percent, the slowest pace of growth since 2001, when the economy expanded 0.8 percent.

When Bush's White House proposed the 2003 cuts, they promised that it would add 5.5 million new jobs between June 2003 and the end of 2004. But "by the end of 2004, there were only 2.6 million more jobs than in June 2003."

As Paul Krugman has pointed out, the belief that Bush's tax cuts successfully stimulated the economy is a form of mythology. CAP's Michael Ettlinger and John Irons wrote in September, "Economic growth as measured by real U.S. gross domestic product was stronger following the tax increases of 1993 than in the two supply-side eras" that followed Reagan's 1981 tax cuts and Bush's 2001 tax cuts.

Indeed, employment growth was much stronger post-1993 than post-2001. The average annual employment growth was 2.5 percent after 1993 and just 0.6 percent after 2001.

And, remember President Bush's $168 billion tax cut/rebate economic stimulus plan the United States Congress approved in February of 2008, to help stave off economic recession. That does not seem to have worked either. Martin Feldstein wrote in the Wall Street Journal that of course the tax cut stimulus didn't work:

Here are the facts. Tax rebates of $78 billion arrived in the second quarter of the year. The government's recent GDP figures show that the level of consumer outlays only rose by an extra $12 billion, or 15% of the lost revenue. The rest went into savings, including the pay down of debt. . .

. . .Although press stories emphasizing that the rebates induced additional consumer spending were technically correct, they missed the important point that the spending rise was very small in comparison to the size of the tax rebates. . .

The small rise in spending in response to these tax rebates is similar to what previous studies of one-time tax cuts found. It also corresponds to what both basic economic theory and common experience imply. Although someone who receives a permanent annual salary increase of $1,000 typically would increase his annual spending by an almost equally large amount, a $1,000 rise in wealth caused by a share price increase or a tax rebate would raise spending only gradually over a number of years.

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